SUPPLY CHAIN FINANCING AND PERFORMANCE OF RETAIL FIRMS IN NAIROBI CITY COUNTY, KENYA
Abstract
Purpose of the Study: This study examined the effect of Supply Chain Financing (SCF) on the performance of retail firms in Nairobi City County, Kenya.
Statement of the Problem: Retail firms in Kenya face working capital constraints, liquidity pressures, delayed invoice settlement, and cash conversion challenges that may disrupt procurement and supplier relationships. Although SCF provides alternative mechanisms for improving liquidity and payment coordination, empirical evidence on the independent contribution of specific SCF practices to retail firm performance in Kenya remains limited. The study therefore examined factoring, reverse factoring, trade credit, and dynamic discounting separately within the Nairobi City County retail context.
Research Methodology: The study adopted a quantitative explanatory research design. The target population comprised 66 managers from 11 purposively selected structured retail establishments in Nairobi City County. Purposive sampling was used to select respondents with responsibilities in finance, logistics, procurement, materials management, and operations. Primary data were collected using a structured questionnaire. Data were analyzed using descriptive statistics, Pearson product moment correlation, and ordinary least squares multiple linear regression, together with regression diagnostic tests.
Results: Factoring was a positive and statistically significant predictor of retail firm performance (B = 0.256, p < 0.001). Reverse factoring was also significant (B = 0.184, p < 0.001), as were trade credit (B = 0.263, p < 0.001) and dynamic discounting (B = 0.240, p < 0.001). The overall regression model was statistically significant, F(4, 55) = 69.81, p < 0.001, and explained 83.5% of the variation in retail firm performance (R² = 0.835; adjusted R² = 0.824).
Conclusion: Factoring, reverse factoring, trade credit, and dynamic discounting were each positively and significantly associated with retail firm performance in the multivariate model.
Recommendations: Retail firms should strengthen the use and governance of trade credit, factoring, reverse factoring, and dynamic discounting in line with their working capital needs and supplier arrangements.
Keywords: Supply Chain Financing, Factoring, Reverse Factoring, Trade Credit, Dynamic Discounting, Retail Firm Performance
References
Abdirad, M., & Krishnan, K. (2022). Examining the impact of e-supply chain on service quality and customer satisfaction: A case study. International Journal of Quality and Service Sciences, 14(2), 274–290. doi.org
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. doi.org
Beka Be Nguema, J. N., Bi, G., Akenroye, T. O., & El Baz, J. (2022). The effects of supply chain finance on organizational performance: A moderated and mediated model. Supply Chain Management: An International Journal, 27(1), 113–127. doi.org
Bell, E., Bryman, A., & Harley, B. (2022). Business research methods (6th ed.). Oxford University Press.
Bolarinwa, O. A. (2015). Principles and methods of validity and reliability testing of questionnaires used in social and health science researches.
Nigerian Postgraduate Medical Journal, 22(4), 195–201. doi.org
Central Bank of Kenya. (2024). Annual report and financial statements 2023/2024. Central Bank of Kenya.
Creswell, J. W., & Creswell, J. D. (2023). Research design: Qualitative, quantitative, and mixed methods approaches (6th ed.). SAGE Publications.
de Goeij, C., Gelsomino, L. M., Caniato, F., Moretto, A. M., & Steeman, M. (2021). Understanding SME suppliers’ response to supply chain finance: A transaction cost economics perspective. International Journal of Physical Distribution & Logistics Management, 51(8), 813–836. doi.org
Emtehani, F., Nahavandi, N., & Mokhatab Rafiei, F. (2023). Trade credit financing for supply chain coordination under financial challenges: A multi-leader–follower game approach. Financial Innovation, 9, Article 6. doi.org
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2022). Multivariate data analysis (9th ed.). Cengage Learning.
International Finance Corporation. (2022). Supply chain finance market assessment: Kenya. International Finance Corporation.
Kayani, E., et al. (2025). Working capital optimization and firm performance in emerging African markets. Journal of African Business, 26(1), 89–104.
Kenya National Bureau of Statistics. (2024). Economic survey 2024. Kenya National Bureau of Statistics.
Ketokivi, M., & Mahoney, J. T. (2021). Transaction cost economics as a theory of the firm, management, and governance. Academy of Management Perspectives, 35(3), 499–519. doi.org
Kiymaz, H., Haque, S., & Choudhury, A. A. (2024). Working capital management and firm performance: A comparative analysis of developed and emerging economies. Borsa Istanbul Review, 24(3), 634–642. doi.org
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221. doi.org
Nyongesa, A. S., & Atieno, M. (2023). Capital structure and profitability of large-scale retail supermarkets in Kenya. European Journal of Economic and Financial Research, 7(2), 45–58.
Parviziomran, E., & Elliot, V. (2023). The effects of bargaining power on trade credit in a supply network. Journal of Purchasing and Supply Management, 29(1), Article 100818. doi.org
Retail Trade Association of Kenya. (2024). Retail sector prompt payment compliance index 2024. RETRAK report library.
Saunders, M. N. K., Lewis, P., & Thornhill, A. (2023). Research methods for business students (9th ed.). Pearson.
Song, H., Yang, X., & Song, Y. (2023). Dynamic discounting program of supply chain finance based on a financial information matching platform. Annals of Operations Research, 331, 221–250. doi.org
Taherdoost, H. (2021). Data collection methods and tools for research: A step-by-step guide to choose data collection techniques for academic and business research projects. International Journal of Academic Research in Management, 10(1), 10–38.
Wernerfelt, B. (1984). A resource‐based view of the firm. Strategic Management Journal, 5(2), 171–180. doi.org
Wetzel, P., & Wagner, S. M. (2025). Supply chain financing theory of the trade payables–performance link. International Journal of Production Research, 63(8), 2806–2830. doi.org
Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. Free Press.
World Bank. (2023). Kenya country economic memorandum: From recovery to inclusive growth. World Bank.
Yang, X., Hu, X., & Song, H. (2026). Evolutionary process and optimal decision-making of the dynamic discounting model in supply chain finance. Electronic Commerce Research, 26, 2643–2679. doi.org
Zhang, H., Jiang, W., Mu, J., & Cheng, X. (2025). Optimizing supply chain financial strategies based on data elements in China’s retail industry: Towards sustainable development. Sustainability, 17(5), Article 2207. doi.org
